Based on a cost-benefit analysis, management at First CommunityBank decided to contract with Technology Solutions, a local data center operator, tohost all of the bank’s financial reporting applications. To avoid the significant costsof developing and maintaining its own data center, First Community contracts withTechnology Solutions to provide IT server access in a highly secure, environmentallycontrolled data center facility owned by Technology Solutions. Similar to First Community,other businesses also contract with Technology Solutions to host applications at the samedata center.The bank is directly linked through highly secure telecommunication lines to the datacenter, which allows bank personnel to transmit data to and from the data center as if thedata center was owned by First Community. For a monthly fee, Technology Solutionssupports the server hardware in an environment with numerous backup controls in theevent power is lost or other hardware failures occur. Bank personnel are responsiblefor selecting and maintaining all application software loaded on Technology Solutionsservers, and selected bank personnel have access to those servers located at the TechnologySolutions data center. Bank personnel enter all data, run applications hosted at TechnologySolutions, and retrieve reports summarizing the processing of all bank transactions.a. What risks might First Community assume with this approach to IT system support?b. How does the use of Technology Solutions impact First Community’s internal controls?c. What impact, if any, does reliance on Technology Solutions as the data centerprovider have on the audit of First Community’s financial statements?
Based on a cost-benefit analysis, management at First Community
Bank decided to contract with Technology Solutions, a local data center operator, to
host all of the bank’s financial reporting applications. To avoid the significant costs
of developing and maintaining its own data center, First Community contracts with
Technology Solutions to provide IT server access in a highly secure, environmentally
controlled data center facility owned by Technology Solutions. Similar to First Community,
other businesses also contract with Technology Solutions to host applications at the same
data center.
The bank is directly linked through highly secure telecommunication lines to the data
center, which allows bank personnel to transmit data to and from the data center as if the
data center was owned by First Community. For a monthly fee, Technology Solutions
supports the server hardware in an environment with numerous backup controls in the
event power is lost or other hardware failures occur. Bank personnel are responsible
for selecting and maintaining all application software loaded on Technology Solutions
servers, and selected bank personnel have access to those servers located at the Technology
Solutions data center. Bank personnel enter all data, run applications hosted at Technology
Solutions, and retrieve reports summarizing the processing of all bank transactions.
a. What risks might First Community assume with this approach to IT system support?
b. How does the use of Technology Solutions impact First Community’s internal controls?
c. What impact, if any, does reliance on Technology Solutions as the data center
provider have on the audit of First Community’s financial statements?
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